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FCC’s Broadband Plan Recommends Changes To Set-Top Box Rules

March 18 , 2010
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Observing that the retail market for set-top boxes has remained stagnant while competition in the market for other network devices (i.e., computers and mobile devices) has flourished, the National Broadband Plan (“NBP”) delivered by the FCC to Congress on March 16th recommends that the FCC adopt new rules and revise existing rules to comply with its mandate under Section 629 of the Telecommunications Act to ensure a competitive and innovative retail market for video set-top boxes. Specific recommendations include that the FCC:

Require all multichannel video programming distributors (“MVPDs”), not just cable operators, to install a gateway device or equivalent functionality in all new subscriber homes and in all homes requiring replacement set-top boxes starting on or before December 31, 2012.

Establish criteria that will foster competition by ensuring that the gateway device functionality:

Is simple and inexpensive.
Functions much like a broadband modem, translating network-specific functions into open standard protocols that permit attachment by network-neutral devices that can access network content independently from MVPDs and third parties.
Uses open, published standards for discovering, signaling, authenticating and communicating with retail devices.
Allows retail devices to access and display without restrictions or degradation in quality all MVPD content and services to which a customer has subscribed.
Avoids restrictive licensing, disclosure or certification requirements, but ensures that any such requirements apply equally to retail and operator-leased devices and that any associated intellectual property is available to all parties at low cost and on reasonable and nondiscriminatory terms.
Passes video content through to retail devices with existing copy protection flags from the MVPD.

Establish interim milestones to ensure that development and deployment of the gateway device or equivalent functionality remains on track.

Formulate appropriate enforcement mechanisms (e.g., fines, denying extensions of certain CableCARD waivers, etc.) for non-compliance.

Consider providing relief for small operators by giving them more time to deploy the gateway device to take into account unique operational or financial circumstances.

The NBP concludes that extending these requirements to all MVPDs would enable manufactures to develop products for a larger customer base and allow consumers to purchase retail devices that will continue to function even if the consumer changes providers. Furthermore, the gateway device would allow MVPDs to continue using different delivery technologies and permit continued innovation and investment, while at the same time allowing manufacturers to design a common open interface for development of multi-function retail devices featuring a range of services and applications.

Recognizing the FCC’s lackluster success in past efforts to facilitate increased competition in the navigation devices market by requiring disaggregation of security and navigation functions of set-top boxes through the use of CableCARDs, the NBP also recommends several revisions to the FCC’s existing CableCARD rules. Specifically, to address the absence of consumer demand for CableCARDs and the unwillingness by manufacturers to produce those devices, the NBP recommends that the FCC adopt on an expedited basis (by the fall of 2010) measures that would:

Ensure that retail devices, like operator-leased devices, can access linear programming in cable systems utilizing switched digital video technology.

Establish transparency in pricing for CableCARDs and operator-leased devices so that consumers can make an informed decision on whether to by or lease a device.

Require discounts off packages that include the price of an operator-leased set-top box if consumers choose to purchase one instead.

Standardize installation policies for retail and operator-leased CableCARD devices so that consumers who opt to purchase, rather than lease, a device do not experience additional installation and support costs and inconvenience.

Streamline and accelerate the certification process for retail CableCARD devices so that it is less time-consuming and costly.

According to the NBP, such revisions would allow cable operators to “fix” issues relating to CableCARD adoption with minimal financial commitment while development of the gateway device functionality progresses. Moreover, addressing these concerns would sustain the current retail market for set-top boxes, enable companies that have invested in CableCARD-supported devices to compete effectively until the gateway device becomes more widely available, and potentially allow for competition in the provision of the gateway device.

The NBP recommendations have been the criticized by the National Cable and Telecommunications Association (“NCTA”), which intends to oppose them at the FCC. NCTA believes that the gateway device should be studied but not mandated and that revisions to the CableCARD rules are inconsistent with the FCC’s goal of supporting an all-MVPD solution and its recognition that CableCARDs are not on a path to successfully spur competition in the video device marketplace.

We would be pleased to respond to any questions regarding these matters.